Why are Financial Crimes on the Rise?

Why are Financial Crimes on the Rise?


The Coronavirus has hit business hard and it’s not all due to the illness, deaths, or the millions of people out of work.  Many businesses have now shuttered or closed forever. But, another plague has hit business while they’re down.  Financial crimes.

A major reason that financial fraud is up significantly is “PPP,” the pandemic “Paycheck Protection Program.” The nearly $1 billion SBA-backed loan program to help businesses keep their workforce employed during the Coronavirus (COVID-19) crisis has been the target of rampant online business fraud. With the next COVID relief stimulus approaching approval in Congress it’s especially important to take stock off the ways financial crimes occur and, importantly, how to take steps to prevent them from happening to your bank or financial institution.

Let’s take a look “under the hood.” Savvy thieves have found it easier to apply for loans that they do not legitimately qualify for. In some instances, financial crimes amount to bank robbery by way of cybercrime. Here are a few examples that illustrate the range of online business fraud:

  • Payroll Fraud: In May 2020, the U.S. Department of Justice alleged that two men had fraudulently sought loans, claiming they had dozens of employees on payroll when they actually had no employees at all. One notorious story is that of Michael Mann, who owned a payroll service and used shell companies to siphon customer funds. He pleaded guilty in August 2020 to a $100 million fraud case in New York. He purportedly diverted more than $1billion over several years.(1)   The PPP program has enabled thieves such as Mann to practice daily fraudulent transactions.
  • Fake or Ghost Employees: These are fictitious employees that don’t actually work for a company, existing only on paper. They are created as part of fraud schemes to make a case for approval of a forgivable loan and subsequently stream these ill-gotten gains to criminals or the masterminds they work for.
  • Identity Theft: Identity thieves posing as real businessmen or individuals have submitted false applications to lenders, and then funnel the money away.
  • Money Laundering: Money launderers commingle funds from criminal enterprises, like cash business schemes, to secure forgivable loans.
  • Account Takeovers: Why use a real identity when you can hack one? This is what happened to Twitter in July of 2020. Through phishing, criminals gained access to credential and then gained access to high profile accounts. While the Twitter hack was high profile, the practice is a common occurrence; often using bots to combine thousands of username and passwords to gain access to accounts.


Outsmart Criminals Through Fraud Risk Management Software

ToolCASE is the financial fraud detection and protection service ideally suited to considerably diminish the risk of cybercrime and fraudulent transactions.

ToolCASE Informant is an AI-based solution for the financial services industry. Combining best-in-class AI, machine learning and pattern recognition, Informant is a full enterprise risk management solution that monitors transactions across all channels for fraud, compliance, audit, lending, collections, marketing and database intrusion in a real-time environment.

Informant incorporates RembrandtAi to offer your organization a unique solution to multiple challenges, including regulatory changes and the growing threat of fraud. The interface makes the system easy to operate and manage for institutions of all sizes. Informant provides friendly and reliable 24/7 service and support to assist with normal operations, urgent situations and future monitoring demands.

(1)  Bloomberg Business, August 28, 2020 by Erik Larsen

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